Good news boosts Lewis shares

The Lewis Group rose more than 6 percent on the JSE yesterday after the retailer beat market expectations with a strong trading update for the quarter to end December. File Photo: IOL

DURBAN – The Lewis Group rose more than 6 percent on the JSE yesterday after the retailer beat market expectations with a strong trading update for the quarter to end December.

Lewis said its merchandise sales increased 22.8 percent during the quarter, enhanced by the acquisition of United Furniture Outlets (UFO).

It said it also performed better in the prior nine months, with merchandise sales up 24.6 percent while comparable stores grew 6 percent for the quarter and 7.1 percent for the nine months.

On Monday, Lewis’ biggest rival, Pepkor Holdings, reported that its homeware product categories achieved 8.6 percent sales growth for the three months to end December.

Lewis said that UFO, which it acquired on a cash amount of R320 million plus any applicable interest in February last year in order to diversify its portfolio, delivered on its potential.

UFO, which is an independent, local cash furniture retailer with 30 stores, sells furniture such as lounge, bedroom and dining room products to the upper LSM 9 to 10.

Besides UFO the group also operates Lewis, Best Home and Electric and Beares in its store network of more than 770 stores.

However, merchandise sales were offset by a weaker performance from other revenue, which consists of finance charges and initiation fees, insurance premiums and services rendered, as they only increased by 0.8 percent for the quarter. “This reflects an improving performance on the 2.8 percent decline in other revenue reported for the six months to end September,” the group reflected.

In the nine months to end December, other revenue declined by 1.6 percent and the group said this was largely due to lower credit sales in prior years and the adverse impact of regulatory capping of credit insurance, which has constrained annuity income streams.

Lewis' total revenue, consisting of merchandise sales and other revenue, increased by 13.2 percent for the quarter and 12 percent for nine months.

The group said in the third quarter, higher credit sales resulted in an increase in debtor costs of 2.7 percent in the third quarter but improved of 5.7 percent after the adjustment for credit impaired accounts.

“Debtor costs for the nine months reduced by 10.3 percent, and by 20.4 percent after the adjustment for credit impaired accounts and this was driven by a strong collection performance throughout the reporting period, resulting in improved collection rates,” the group said.

Lewis shares closed 4.92 percent higher on the JSE on Wednesday at R32.42.